The Problem of CFO Succession Planning and How Corporations Can Fix It

Today’s CFO role has drastically changed from what it once was. In times past, CFOs were heralded as the chief providers of financial data and reports. They’ve always been tasked with relaying the story of the company’s past to shareholders and board members and forecasting its financial future. 

The CFO role is now much more strategic. They’re expected to focus on value creation, integrate ESG and sustainability initiatives with corporate finances, and embrace digital transformation. As the CFO role becomes more entrenched in strategic leadership, the required skill set becomes increasingly broad.

The fact that CFOs are such an important part of the C-suite begs the question of why companies aren’t prioritizing succession planning for the role. According to recent data highlighted by Deloitte, 25% of corporations don’t have a succession plan in place for their current CFO. Among companies with revenue of $10 billion or more, 28% lack an adequate succession plan. 

This issue would likely not be so urgent if CFO resignations weren’t surging. In the first quarter of 2024, 82 CFOs at some of the largest organizations left their posts. The same high quit rate was seen in the preceding years. 

With increasing workloads making work/life balance more difficult, economic uncertainty making CFO replacement more likely, and corporations using the CFO role to train and develop the next CEO, the rate of CFOs staying put for decades at a time is no longer high. Boards and CEOs need to know how to handle these changes to sustain growth and success.

The Rise of the Interim CFO Role

Corporations aren’t recklessly eschewing the CFO role altogether. Instead, they’re turning to something a bit more temporary than a long-term successor: the interim CFO. While succession plans are declining at what some would deem too fast a clip, demand for interim CFOs is up more than 100% year over year.

Why is this happening? Part of it is due to a new awareness that there are executives out there who would agree to short-term work. Many of them command higher salaries and more robust benefits packages for their work, making the job even more appealing.

Hiring interim CFOs also quashes common issues that hinder CFOs from remaining in their roles over the long haul. Better pay and benefits can keep executives from seeking vertical moves for more money and can lead to better work/life balance. Short-term work also allows CFOs to try out different industries — Deloitte says 47% of finance chiefs cited this benefit as a primary consideration for leaving a job.

Interim CFOs Benefit Corporations Too

Hiring an interim CFO brings many benefits to the corporation as well. For one, it provides a short-term solution for filling a critical role in the midst of an ongoing talent shortage, when finding a new CFO can take anywhere from a few months to a year. 

Additionally, it allows smaller corporations that may not yet need a permanent CFO the opportunity to have that expertise in-house to help build a solid financial foundation for future growth.

However, the true benefit of interim CFOs lies in corporate teams having the opportunity to find a just-right match to solve a particular problem. 

Full-time CFOs must display a broad set of professional competencies, including accounting expertise, interpersonal skills for investor relations, the ability to create and execute strategy, and a knack for operational excellence.

An interim CFO, on the other hand, just needs enough skills and experience to solve the problem they were hired to fix. Having tunnel vision when it comes to the CFO role can be less stressful for interim execs, and it allows corporations to widen their talent pools with candidates who may not check all of their boxes for a permanent CFO but can help them patch a hole in their organization.

Succession Planning Is Still Critical for Organizations

Even as corporate leaders are seeing success with interim executives, it’s still crucial for organizations not to let go of succession planning for the role. Teams can use the popularity of interim roles as a way to bolster succession plans. 

One way to do this is to promote internal candidates to the interim CFO role. If done right, this approach allows companies to develop a pipeline of professionals who have proven capabilities to get the job done. When it’s time to hire a permanent CFO, they may have several candidates whom they have already seen in action.

To do this well, leadership needs to avoid overburdening executive hopefuls with the responsibilities of their current role while working to fulfill their CFO duties. Additionally, it’s important that senior leadership and board members think ahead about how to invest in the next generation of CFOs. Ensuring that those in the pipeline are getting the broad operation experience they need for their potential next role is key to success.

What CFOs Have to Say About How to Plan for Succession

Deloitte’s recent survey of CFOs hinted at what CFOs believe organizations need to do to prepare the next generation of finance chiefs. Executives should note that rotating them into different finance units, identifying stretch opportunities, and putting them in positions of greater leadership are high on the list.

However, there are a few actions CFOs consider even more important. Finance executives believe companies need to take three approaches to help potential CFOs reach the next level: place successors in managerial training programs, coach them on how to do the job, and work with them to develop a transition plan.

Take Advantage of New Opportunities to Reach the Next Level of Success

CFOs departing their roles at unprecedented rates has exposed a new issue in the corporate landscape. Many of the world’s top organizations lack a bonafide succession plan for finance executives. At many companies, interim CFOs hired on a short-term basis to solve specific problems are paving the way for a new type of finance leader.

Succession planning should be the norm for corporations that want to do well against this backdrop of rapid change. If candidates get managerial training, proper coaching, and a solid transition plan, execs can use the interim chair to build a proven talent pipeline that just might lead them to their next finance powerhouse — and ultimately to organizational success.